NHS 24 PUBLIC DELEGATED AUTHORITY LEVEL AND IMPLICATIONS OF CNORIS

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1 NHS APRIL 2009 BOARD MEETING FOR APPROVAL ITEM NO. 7.7 DELEGATED AUTHORITY LEVEL AND IMPLICATIONS OF CNORIS This report considers the levels of delegated authority that the Board of NHS 24 has for the payment of legal claims. Lead Executive: Director of Finance & IT Version: INTRODUCTION 1.1 The NHS 24 Board, at its meeting on 26 th February noted the revised delegated authority for NHS 24. The NHS 24 Board requested the Director of Finance & IT to clarify the delegated level of authority in respect of compensation payments for clinical and non-clinical claims. 1.2 The delegated authority levels are included in Appendix I of this paper for information. 2. CNORIS (Clinical Negligence and Other Risks Indemnity Scheme) 2.1 CNORIS is a not-for-profit mutual scheme, created by the then Scottish Executive Health Department in 2000 in partnership with Willis Ltd, the appointed scheme manager. Its primary objective is to provide cost-effective risk pooling and claims management arrangements for all Health Boards in Scotland. 2.2 The Scottish Government Health Directorates (SGHD) fund all large losses (ie. those which breach CNORIS scheme deductibles, currently 25,000) during each financial year. The annual insurance premia that all Health Boards pay is used to fund the deficit accrued in-year by SGHD. 3. DELEGATED AUTHORITY LEVELS 3.1 NHS 24 has sought clarification of the delegated authority levels and the implications of CNORIS. 3.2 The Scottish Government have provided the following definitions for item numbers 23 to 27 on their loss and special payment schedule. These are the key lines relating to the payment of legal claims. Item No. Category Compensation Payments legal 23 Clinical 250, Non Clinical 100,000 Ex-gratia payments: 1

2 25 Extra-contractual Payments 10, Compensation Payments Ex-gratia Clinical 250, Compensation Payments Ex-gratia Non Clinical 100,000 Item No has been defined as a clinical compensation payment made under legal obligation; Item No has been defined as a non clinical compensation payment made under legal obligation; Item No has been defined as a payment not legally due, but there is an obligation which the courts may uphold; Item No. 26 relates to compensation payments in clinical cases where the legal advice obtained by the CLO has recommended a settlement in advance of the case going to court. The NHS Board does not have powers to offer compensation without legal advice from the CLO recommending this course of action. This advice would include guidance on the likely outcome of any court decision and also whether a settlement could be taken forward on the basis of an economic settlement for the public purse. The fact that the CLO are involved and that a payment is made based on their advice does not constitute a legal obligation; Item No. 27 relates to compensation payments in non clinical cases where the legal advice obtained has recommended a settlement in advance of the case going to court. The NHS Board does not have powers to offer compensation without legal advice recommending this course of action. This advice would include guidance on the likely outcome of any court decision and also whether a settlement could be taken forward on the basis of an economic settlement for the public purse. The fact that the CLO were involved and that a payment is made based on their advice does not constitute a legal obligation. In terms of items 26 and 27, although SGHD describe this as an "ex gratia" payment, it could possibly be described more accurately as an "out of court" settlement. 3.3 Annex 3 of HDL (2001) 65 provides further clarification on the Delegated Limits Process. This Annex is included as Appendix II to this paper. 4. IMPLICATIONS OF CNORIS 4.1 As mentioned in point 2.2, under the CNORIS scheme, NHS 24 only pays the first 25,000 of every claim. 4.2 All clinical compensation claims under the CNORIS scheme are ultimately approved by SGHD. However, their involvement in the process is much more akin to noting based on legal advice received. If a Board has a legal obligation to make a payment, then SGHD would not attempt to overrule such a decision. 4.3 The route followed differs slightly depending on the amount For clinical claims settled by the Board above 25,000, but less than 250,000, the Central Legal Office (CLO) will report settlement details to Willis Ltd who then 2

3 forward them onto Health Finance at SGHD for approval. Board authority to settle non-clinical claims is limited to 100, For clinical claims above 250,000, the CLO send details to the Scottish Government legal directorate who then forward the claims on to Health Finance for approval. Non-clinical claims above 100,00 require Health Finance approval. 5. RECOMMENDATION 5.1 The Board is asked to approve the clarification from the Director of Finance & IT on the delegated authority levels and the implications of CNORIS. 3

4 Appendix I The table, below, provides a list of the recently revised delegated authority levels from SGHD for each category of loss and special payment and compares this with the previous level. Item No. Category Theft/Arson/Wilful Damage Revised Current 1 Cash 10,000 5,000 2 Stores/procurement 20,000 20,000 3 Equipment 10,000 10,000 4 Contracts 10,000 5 Payroll 10,000 6 Buildings & Fixtures 20,000 20,000 7 Other 10,000 Fraud, Embezzlement & other Irregularities (inc. attempted fraud) 8 Cash 10,000 9 Stores/procurement Equipment 10, Contracts 10, Payroll 10, Other 10, Nugatory & Fruitless Payments 10,000 5, Claims Abandoned (a) private Accommodation 10,000 5,000 (b) Road Traffic Acts 20,000 5,000 Other 10,000 5,000 Stores Losses 16 Incidents of the Service - Fire 20,000 20,000 - Flood 20,000 20,000 - Accident 20,000 20, Deterioration in Store 20,000 20, Stocktaking Discrepancies 20,000 20, Other Causes 20,000 20,000 Losses of Furniture & Equipment And Bedding & Linen in Circulation: 20 Incidents of the service Fire 10,000 10,000 - Flood 10,000 10,000 - Accident 10,000 10, Disclosed at physical check 10,000 10, Other causes 10,000 20,000 4

5 Item No. Category Compensation Payments legal obligation 23 Clinical * 250, , Non-clinical * 100, ,000 Ex-gratia payments: 25 Extra-contractual Payments 10,000 5, Compensation Payments Ex-gratia 250, ,000 Clinical * 27 Compensation Payments Ex-gratia Non 100, ,000 Clinical * 28 Compensation Payments Ex-gratia 25,000 25,000 Financial Loss * 29 Other Payments 2,500 2,500 Damage to Buildings and Fixtures: 30 Incidents of the Service - Fire 20,000 20,000 - Flood 20,000 20,000 - Accident 20,000 20,000 - Other causes 20,000 20, Extra-Statutory & Extra-regulatory Nil Nil Payments 32 Gifts in cash or kind 10,000 2, Other Losses 10,000 2,500 All frauds and attempted frauds must be detailed on form SFR 18.1(c) *This delegated limit was revised as at 1 st August 2001 HDL (2001)65 + those losses which do not broadly fall within the definitions of theft, arson, wilful damage, fraud, embezzlement and attempted fraud and would have fallen within the previous item 2 "Cash Losses Overpayments of salaries, wages and allowance" and the previous item 3 "Cash Losses Other" should be included within this heading 5

6 Appendix II HDL (2001) 65 Annex 3 CLINICAL NEGLIGENCE AND OTHER RISKS INDEMNITY SCHEME (CNORIS): DELEGATED LIMITS PROCESS Introduction 1. Where a Scheme member intends to recover payments from the CNORIS financial pool, and/or the award involved exceed the member s delegated limit, the member is required, in terms of regulation 9(2)(b)(i) and 9(5)(a) of the NHS (Clinical Negligence and Other Risks Indemnity Scheme) (Scotland) Regulations 2000 to obtain the prior written approval of the Scottish Ministers (SEHD). This notice details the old and new delegated limits for clinical and non-clinical cases and outlines the process by which authority to exceed the limits should be sought and obtained. The new delegated limits and approval process are effective from 1 August Revised Delegated Limits 2. The following Table details the old and new delegated limits. To qualify for a payment from the CNORIS financial pool, i.e. to obtain a contribution towards a compensation payment, the member must have SEHD s prior approval to making any settlement that is at or above the relevant figure quoted below. Compensation Payment OLD OLD NEW NEW Category Clinical Non-clinical Clinical Non-clinical Under legal obligation 100, , , ,000 Under no legal obligation 5,000 5, , ,000 Financial Loss n/a 5,000 n/a 25, The delegated limits apply to both lump sum and structured settlement cases. For the latter, the settlement figure is the full value of the award and not just the agreed lump sum component. Also, from 1 August 2001 all structured settlements require prior SEHD approval before being finalised with the pursuer or their agents. In such cases the member, or their appointed agents, should submit a full business case to support the settlement calculation and evidence best value for money. The address for such submissions is Colette Templeton, SEHD Finance Directorate, Room 401, Waterloo Place, Edinburgh, EH1 3DN (% (0131) ). A short explanatory note on structured settlements is provided in the attached Appendix. Process 4. As soon as the member concludes that it is appropriate to make an offer to settle a claim at a sum equal to or above the relevant delegated limit the member s solicitor should provide the Office of the Solicitor to the Scottish Executive (OSSE) with the following: Clinical Cases and Non-Clinical Cases o The Open or Closed Record as appropriate; o A note setting out the current position in the case; o Note on Line/Merits from Counsel or, if Counsel is not instructed, the solicitor acting in the case; o A note of when OSSE decision required. 6

7 5. In either case OSSE may request additional information from the agent. Such requests should be processed as quickly as possible. 6. Both CLO and the Willis (Scheme Managers) appointed loss adjusters (Cunninghams) are aware of these requirements and will contact OSSE direct in accordance with paragraph 4 above. If members elect to use other agents then they must bring this notice to their attention at the time of appointment. 7. The address for the above required submissions is Mr Gordon McNicoll, OSSE, Division B2, Room G-A21, Victoria Quay, Edinburgh, EH6 6QQ (% (0131) ). A copy of the covering letter (only) should be sent to Colette Templeton at the address in paragraph 3. Urgent Settlement Cases 8. It is recognised that, occasionally, there will be cases where the need to secure a quick or almost immediate settlement arise. SEHD consider that the need to obtain prior approval if the delegated limit is exceeded should not be allowed to interfere with early settlement where there are strong grounds to suggest that a financially favourable outcome for the defender will only be achieved by immediate action on their part. However, such cases are expected to arise on only very rare occasions and they will require post-settlement scrutiny by OSSE. The documentation listed at paragraph 4 above, together with an note detailing why it was not possible to obtain prior approval should be submitted within 4 weeks of the said settlement. Financial Loss Cases 9. Prior approval to exceed the delegated limit for financial loss cases must be sought directly from the SEHD Finance Directorate (Colette Templeton, address as above). Documentation requirements are the same as those listed for non-clinical at paragraph 4 above. OSSE will be consulted where it is considered appropriate. Urgent settlement cases are not expected for this category of compensation. Notification of Decisions 10. OSSE undertake to notify their decision to the referring agent within the required timescale specified by the member, so far as this is reasonably practicable. OSSE will advise SEHD Finance Directorate of approved cases and the Directorate will formally notify the member s Director of Finance accordingly. A copy of the notification should be submitted to Willis with the documentation that seeks a contribution from the financial risk pool. Urgent settlement cases should include confirmation that OSSE will be provided with the requisite data within the due timescale. Willis will advise SEHD Finance Directorate of all such cases so that they and OSSE can track the postsettlement scrutiny process. 11. Decisions on financial loss cases will be notified to the agent and appropriate Director of Finance within two weeks of receipt. Summary of Key Requirements for Members and their Agents Prior approval required for clinical compensation cases likely to settle at 250,000 or above. 7

8 Prior approval required for non-clinical cases (except financial loss) likely to settle at 100,000 or above. Prior approval required for financial loss cases likely to settle at 25,000 or above. Post-approval requirements exist for urgent clinical and non-clinical settlement cases. Prior approval required for Business Cases on structured settlements that exceed above limits. Appendix Explanatory Note on Structured Settlements In the normal course of events an award will comprise a lump sum to the pursuer. The pursuer (or their agents) will usually take an element of the sum for immediate needs, e.g. accommodation and specialist care equipment/services, and invest the balance in annuities to give an income stream for the rest of the patient s life. In addition to having to pay a large sum up front, the financial disadvantage (risk) for the NHS is that the patient dies much sooner that estimated (life expectancy influences the size of the award) and thus the financial benefit passes to the patient s relatives or dependants. The risk to the patient is that they live longer than the annuity period and could then suffer financial hardship. It may be that the NHS that has to resume provision of healthcare services from then on, which is effectively another financial risk for the NHS. Under a structured settlement the pursuer receives a smaller lump sum but the annual payment from investments are structured and guaranteed to them (and them only) for the rest of their life. Those payments are met by the NHS either by way of a self-funding or a commercial annuity. Before deciding to sign on for a structured settlement, the Trust or Health Board should prepare a business case to determine which (self-funding or commercial annuity) offers the best VFM for the NHS. For the pursuer, structuring the settlement has another financial benefit in that income payments are not liable to income tax. The advantage to the NHS is that overall the award value (lump sum) can be discounted against the financial benefits gained by the pursuer. Also, because the lump sum is not paid in full up front, the risk of overcompensation due to early death is removed. Neither the NHS or the pursuer is under any obligation to proceed with a structured settlement following negotiations, i.e. it is entirely voluntary on both sides. The Central Legal Office always recommends their clients pursue one for claims that exceed 250,000. 8